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In his first State of the City address last week, Duggan repeated campaign promises to look seriously into creating a company he calls D-Insurance.

Duggan is pushing for low-cost options as a way to retain city residents and remove one of the biggest barriers to people moving back to Detroit — the high cost of auto insurance, said Melvin "Butch" Hollowell, Detroit's corporation counsel.

"Detroit's auto insurance average is north of $5,000 a year. That is $1,200 more than the No. 2 highest of Philadelphia," Hollowell told Crain's.

Duggan has often told the story of how his auto insurance premiums doubled to $6,000 annually when he moved to Detroit in 2012 from Livonia.

"At Detroit Medical Center, Mike started a (medical malpractice liability) company for physicians that lowered costs and made a good return. He plans on doing the same thing for drivers and the city of Detroit," Hollowell said.

Peter Kuhnmuench, Insurance Institute of Michigan

Besides creating a new insurance entity, other ideas include the city serving as a broker and advocate for city residents or working with an existing insurer as a preferred provider.

Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, a Lansing-based trade group, said starting a new insurance company is not easy, especially for a city going through bankruptcy proceedings.

"Be careful what you ask for. It is a tough business, especially one that includes the health care side of it," Kuhnmuench said. "It is a pretty significant undertaking, especially starting one from ground zero."

Kuhnmuench said it could take the city up to 18 months to get a new company licensed and operational.

Under state insurance regulations, new auto companies are required to file an application that shows they have funding and a solid business plan. Requirements include $7.5 million in minimum capital, access to additional capital based on a state solvency review, a business plan that shows adequate support staff, and systems to collect premiums, pay claims and provide customer service, said Caleb Buhs, public information officer with the Michigan Department of Financial and Insurance Services.

Buhs said there are about 150 auto insurers operating in Michigan. The last company licensed was in 2006, but that company was affiliated with a larger corporation that already had capital in place, he said.

In a statement to Crain's, Speaker of the Michigan House Jase Bolger, R-Marshall, said he plans to discuss ideas with Duggan on how to lower auto insurance rates for Detroit residents.

Jase Bolger, R-Marshall

"Reforms that protect (Michigan's) nation-leading benefits while driving down (the state's) nation-leading costs would be necessary to help Detroit's residents," Bolger said.

The pilot plan in Bolger's proposal originally was Senate Bill 326, introduced by Sen. Virgil Smith, D-Detroit. Bolger's plan would allow injured motorists who incur injuries above the $50,000 policy limit to be covered by Medicaid or the driver's health insurance policy.

"We should see if this pilot program works," Kuhnmuench said. "Let's test the marketplace and see if it moves the needle" on lowering costs to about $50 per month and insuring more low-income drivers under 133 percent of the federal poverty level.

Hollowell said Duggan is opposed to Bolger's plan, but the mayor plans to lobby Bolger to include several other methods to lower auto insurance premiums. They include mandating insurers to refund consumers for overcharges and prohibiting the use of credit scores to set premiums, a practice that he said increases costs for Detroit residents.

Some of the no-fault reform proposals were part of a package of bills — the Fair and Affordable Insurance Reform initiative — Hollowell presented in 2009 when he was Michigan's insurance advocate under former Gov. Jennifer Granholm.

George Sinas, legal counsel for the Coalition for Protecting No-Fault Auto, a Lansing-based health care advocacy group, said Duggan's plan could provide an alternative to high-cost auto insurance for Detroiters.

"It could improve the affordability of insurance, making it more humane and fair," he said.

Sinas said the existing auto insurance system is too adversarial and makes it difficult for drivers to file claims, especially when they are injured in car accidents.

"We are concerned about limiting benefits" to $50,000, Sinas said. "Someone who is economically disadvantaged should not be limited to a small portion of the coverage that is available to everyone."

Hollowell said the feasibility plan for D-Insurance should be completed this summer and presented to the City Council and Emergency Manager Kevyn Orr for approval. Hollowell emphasized that the plan is not limited to Detroit creating its own insurance company.

"We could structure a relationship with an existing (auto insurer) like a preferred provider organization under a group policy for qualifying residents," Hollowell said.

For example, Hollowell said, Detroit could act as a broker to bring a group of low-income citizen drivers to an auto insurer for lower costs. The broker option also could lead to other group-type insurance policies, including property insurance, he said.

Another option would be for the city to create an insurance company to cover drivers for comprehensive and collision coverage. Then it could collaborate with an auto insurer to cover motorists for personal injury protection and liability.

"We have thought about splitting up the companies and opening the up market," Hollowell said. "The (state) insurance code allows this."

Sinas said offering separate policies for health care and auto liability could create competition that could lower prices.

"Health care only costs 18 percent of premiums," Hollowell said. "More than 60 percent of costs are on the comprehensive and collision side. We need to do something about the prices that repair facilities get."

Hollowell said the city also could extract volume discounts by contracting with efficient and reputable auto repair shops.